On Thursday, BofA Securities revised its price target for Alkermes (NASDAQ: NASDAQ:ALKS), a biopharmaceutical company, to $29 from the previous $29, while maintaining a Neutral rating on the stock.
The adjustment follows Alkermes' performance that did not align with market expectations, with the company's stock declining by 2% amidst a generally positive trend in the biotech sector, where the XBI index rose by 4% and the DRG index increased by 1%.
The price target revision was prompted by Alkermes' recent earnings report, which showed a slight shortfall in sales and earnings per share (EPS). However, the analyst from BofA Securities believes that this quarterly miss does not pose a threat to the company's financial guidance for the fiscal year 2024. The current consensus on Alkermes' outlook is deemed reasonable for the near to medium term, according to the analyst.
The firm's stance on Alkermes is that while the company is not expected to exceed and elevate financial forecasts, the de-risking of its pipeline is crucial for any potential improvement in the stock's rating. The analyst highlighted that phase 1 data for ALKS2680, a key asset in Alkermes' pipeline, showed promise.
This drug is an orexin-2 receptor agonist (OX2R) and is considered an essential component of the company's future prospects. However, there are still significant uncertainties that will need to be addressed with phase 2 data, which are anticipated to be available in the second half of 2025.
The rationale behind the maintained Neutral rating and the reduced price objective is a balanced risk/reward scenario for Alkermes. While there may be potential upside from the company's pipeline, this is counterbalanced by the more extended timeline for upcoming catalysts and the absence of a pattern of financial performance that consistently surpasses expectations.
InvestingPro Insights
As investors digest the latest price target revision for Alkermes by BofA Securities, it's worth considering additional insights from InvestingPro. Notably, Alkermes boasts a strong balance sheet, holding more cash than debt, which is a positive sign for financial stability. This is complemented by the company's ability to generate strong free cash flow, as indicated by a valuation that implies a robust free cash flow yield. Moreover, analysts have confidence in Alkermes' profitability, predicting the company will be profitable this year and noting that it has been profitable over the last twelve months.
From a data standpoint, Alkermes' market capitalization stands at $4.06 billion, with an attractive price-to-earnings (P/E) ratio of 7.38, which further adjusts to 7.03 when looking at the last twelve months as of Q1 2024. The revenue growth is also impressive, with a 54.01% increase over the last twelve months as of Q1 2024. Such financial metrics underscore the company's strong performance and potential for growth, despite the recent stock price decline.
For those interested in deeper analysis and additional InvestingPro Tips related to Alkermes, consider exploring the comprehensive insights available at Investing.com/pro/ALKS. There are 7 additional InvestingPro Tips that could provide further clarity on the company's financial health and outlook. And don't forget, you can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering even more value as you navigate your investment decisions.
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